UK business confidence rebounded in the quarter ahead of the triggering of Article 50, according to the Global Economic Conditions Survey released today.

The quarterly survey of global CFOs and finance professionals, conducted by ACCA (the Association of Chartered Certified Accountants) and IMA (the Institute of Management Accountants) has found that consumer spending has driven UK business confidence to its highest level since the second quarter of 2015.

The UK’s performance is consistent with a global uplift in confidence, with an optimistic mood in the US combining with a stable outlook in China, India and the Eurozone.

In response to the report Faye Chua, head of business insights at ACCA, says,

‘Confidence levels in the UK since the referendum in June have surprised many observers, with consumer spending proving robust and the fall in sterling providing a boost to exporters. Even with the expectation that Article 50 would be triggered by the end of the quarter, businesses are still clearly expecting favourable economic conditions in the short term.

‘Yet while this means the UK enters the Brexit negotiations in better shape than anticipated, this only marks the beginning of a long and uncertain process. Once negotiations begin, business will look towards government as well as market conditions for reassurance over longer term impacts.‘

The global outlook

Echoing the UK findings, global business confidence rebounded in the first quarter of 2017 and is now at its highest level since the second quarter of 2015. The rise in economic sentiment has been spearheaded by an increasingly confident outlook in North America and is reflected across leading developed and emerging markets. In particular, there has been the fastest rate of growth in global trade since 2015.

Yet the survey has found that inflationary fears are putting pressure on global economies, with nearly half (46%) of firms reporting increasing costs as a cause for concern. Despite this there are significant improvements for employment and investment, with 22% of firms planning to create more jobs and raise capital expenditure – up from 16% and 14% respectively in Q4 2016.

Faye Chua says there is an increasingly optimistic global mood,

‘The rise in confidence, combined with strong economic hard data, offers genuinely encouraging signs for the global economy: with an increasingly optimistic mood in the US and a stimulus-led recovery in China driving prospects for world trade.

‘Whilst there are concerns on the horizon – especially around inflationary pressures as the global era of low interest rates continues – this has been a strong start to the year. Combined with hard economic data, these are the clearest signs of a synchronised and sustained recovery since 2011.’

Yet Faye Chua adds that the actions of politicians and policy-makers will have an important role in the coming months,

‘This quarter demonstrates there are signs that the global economy is returning to a degree of health after some very tough years: the IMF is expecting global growth of 3.4% this year, the fastest rate since 2012.

‘Yet in this period of fragile recovery, a number of policy interventions could have a significant impact. The new US administration has proven moderate in trade policy so far but the potential remains that a more restrictive direction could be implemented. Similarly, whilst some expected Philip Hammond to loosen the purse strings in the previous Budget, expectations of government spending in the UK has fallen sharply in this quarter – this is in contrast to improving expenditure prospects across many Western economies.

‘How policy-makers respond to this uncertainty, and growing inflationary pressures, will be crucial over the coming months.’

The Global Economic Conditions Survey (GECS), carried out jointly by ACCA (the Association of Chartered Certified Accountants) and IMA (the Institute of Management Accountants), is the largest regular economic survey of accountants around the world, in terms of both the number of respondents and the range of economic variables it monitors.

Fieldwork for the Q1 2017 GECS took place between 24 February and 13 March 2017 and attracted 1,334 responses from ACCA and IMA members around the world, including more than 150 CFOs. There were 179 responses from the UK.